Analyst Meet / AGM - Analyst Meet

10-Nov-2017, 08:44
State Bank of India conducted an analyst meet on 10 November 2017 to discuss the financial performance for the quarter ended September 2017 and prospects of the bank. Rajnish Kumar, Chairman of the bank addressed the meet:

Highlights:

• The bank proposes to become a completely modern bank in next three years, while it is focusing on further improving three areas such as NII and other income, operating expenses and credit costs to improve its RoAs

• The retail and digital banking related RoA for the bank are best in the industry. As per the bank, as the external situation improves, the bank would be able to recover faster than the other banks. The bank aims to achieve an RoA of 1%, after the stabilization of external situation.

• On income front, the bank would be prioritizing capital allocation for the segments where RoA are better and focus would be on segments such as retail, SME, agriculture and high rates corporates. The bank would be maintaining credit market share and shift portfolio towards higher RoA products. The bank also aims to improve the wallet share in overall business. On liabilities front, the bank focuses on increasing current account share in CASA.

• On expenses front, the bank would focus on process improvement for enhancing operating efficiency through use of data analytics and technology. The bank has rationalized 1344 branches/ offices post merger, and expects annual saving of Rs 1150 crore. The bank has also reduced 42 currency chest in H1FY2018 and continued its rationalization. The bank has continued migration of transactions to digital channels currently at 36%, and targets 65% in the medium term.

• On credit costs side, the bank would focus on improving its risk management practices, underwriting skills, early recognition of stressed asset, recovery and resolution.

• The CD ratio of the bank stands at 65% against the normal level of 75-80%, while bank aims to improve CD ratio, going forward.

• The other income buckets of the bank are well diversified and reduce risk on variation in any of the segment.

• As per the bank, the overhead expenses are well under control, while bank is aiming for further improvement in cost-to-income ratio.

• Subsidiaries of the bank are doing well, while bank expects to take some of subsidiaries to the market over next two years.

• The bank has sponsored 18 regional rural banks with the network of 5000 branches and 20000 staff, while the bank expects to lists some regional rural banks.

• The card business is doing well, while the bank expects to raise stake in cards business.

• The bank has sharply improved its provision coverage ratio by 400 bps to 65% in Q2FY2018.

• The bank has substantially reduced fresh slippages to Rs 9026 crore in Q2FY2018 from Rs 26249 crore in Q1FY2018. The slippages from the SME segment stood at Rs 1200 crore, agriculture Rs 2250 crore and retail personal loans Rs 693 crore in Q2FY2018. The croporate slippages stood at Rs 4538 crore, while slippages from the watch lists account were Rs 2448 crore in Q2FY2018.

• The size of watch list account of the bank has declined to Rs 21000 crore end September 2017 from Rs 24000 crore end June 2017, while the bank expects the fresh slippages to be from outside the watch list, going forward.

• The bank has exposure of Rs 50000 crore to the accounts identified by the Reserve Bank of India for resolution under NCLT mechanism, while the exposure in the second list is Rs 26000 crore. The outstanding exposure to NCLT case stands at Rs 72000 crore and bank has made 50% provision on these accounts.

• The SMA-2 category loans of the bank remain stable.

• The bank is well preparing for shift to IFRS norms as and when implemented and its gearing up provision coverage.

• With respect to recapitalization, the bank expects to get its due share helping to improve loss absorption capability.

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